2011 (1) TMI 884 - HC - Income Tax

Income escaping assessment - change of opinion - held that - the respondent has nowhere stated that the corrected computation submitted by the petitioner is incorrect or that the petitioner is not entitled to be taxed on the said income. - The only ground for re-opening is that the petitioner was not entitled to file revised statement beyond the statutory period under section 139(5) of the Act and the Assessing Officer was not justified in accepting the corrected statement and making assessment accordingly. - The decisions referred to in the order recording reasons can in no manner be said to be tangible material so as to justify initiation of proceedings under section 147 of the Act. Thus in effect and substance the re-opening is based on a mere change of opinion and as such the impugned notice under section 148 of the Act as well as all proceedings pursuant thereto cannot be sustained. - Decided in favor of assessee.

Summary

Issues Involved:
1. Validity of the notice issued under section 148 of the Income Tax Act, 1961.
2. Jurisdiction of the Assessing Officer to reopen assessment under section 147 of the Income Tax Act, 1961.
3. Concept of "change of opinion" and its applicability in the case.
4. Requirement of "tangible material" for reopening assessment.
5. Compliance with the provisions of section 139(5) of the Income Tax Act, 1961 regarding revised returns.

Detailed Analysis:

1. Validity of the Notice Issued Under Section 148:
The petitioner challenged the notice dated 28th July 2010 issued under section 148 of the Income Tax Act, 1961, which sought to reopen the assessment for the Assessment Year 2006-07. The petitioner argued that the reopening was based on the same material considered during the original assessment, thus constituting a mere change of opinion without any new tangible material.

2. Jurisdiction of the Assessing Officer:
The petitioner contended that the Assessing Officer lacked jurisdiction to reopen the assessment under section 147 of the Act as the reopening was based on the same facts and circumstances already considered during the original assessment. The respondent argued that the petitioner was not entitled to file a revised statement beyond the statutory period under section 139(5) of the Act, and the Assessing Officer had reason to believe that income had escaped assessment.

3. Concept of "Change of Opinion":
The petitioner argued that the reopening of the assessment was based on a mere change of opinion, which is not permissible. The respondent countered that no opinion had been formed initially regarding the admissibility of the revised computation, and therefore, the reopening was not a change of opinion. The court referred to the Supreme Court's decision in Commissioner of Income-tax v. Kelvinator of India Ltd., which held that reopening on the basis of a mere change of opinion is not valid.

4. Requirement of "Tangible Material":
The court emphasized that for reopening an assessment, there must be "tangible material" to justify the belief that income had escaped assessment. The court found that the Assessing Officer's belief was based on the fact that the petitioner had filed a revised statement beyond the statutory period, which did not constitute tangible material. The court held that the reopening was based on a mere change of opinion, as the same issue had been considered during the original assessment.

5. Compliance with Section 139(5) Regarding Revised Returns:
The petitioner had filed a revised computation of income in response to the Assessing Officer's queries, which was accepted during the original assessment. The respondent argued that the petitioner was required to file a revised return within the statutory period under section 139(5) of the Act. The court noted that the revised computation was correct and accepted by the Assessing Officer, and the reopening of the assessment on the ground of non-compliance with section 139(5) was not justified.

Conclusion:
The court concluded that the reopening of the assessment was based on a mere change of opinion without any tangible material, and therefore, the assumption of jurisdiction by the Assessing Officer was invalid. The impugned notice under section 148 of the Act and all proceedings pursuant thereto were quashed and set aside. The petition was allowed, and the rule was made absolute with no order as to costs.